Dear reader,
Two Drops, Two Very Different Stories
The stock market has a habit of flattening everything into the same shape. A share falls 15% and the headline calls it a crash. Investors scroll past, file it under “bad week,” and move on. But not all sell-offs are alike. This week, two well-known British companies WHSmith and Halma each saw their share prices collapse by roughly that amount. On a screen full of red numbers, they look identical. They are not.
One is a business in genuine trouble. The other committed the modest crime of being very good when the market had priced in exceptional.
WHSmith: The Slow Unravelling of a Grand Plan
To understand what happened to WHSmith this week, you need to go back further than the profit warning.
The company that exists today is the product of a strategic gamble that began years ago. Management decided to exit the British high street entirely a sensible enough call given the structural headwinds facing physical retail and reinvent itself as a pure-play global travel retailer. The high street estate was sold to Modella Capital, the hospitals and railway stations were kept, and the ambition was to build a dominant position in the captive-audience world of airport retail: passengers with time to kill and nowhere else to go. WHSmith opened the first ever travel retail store at London’s Euston Station back in 1848, so there is a pleasing circularity to the idea. The execution, however, has been rather less elegant.
The North American expansion through the acquisitions of InMotion and Marshall Retail Group was supposed to be the engine of international growth. Instead, it became the source of the company’s deepest problems. In August 2025, WHSmith’s shares fell as much as 42% in a single day after the company admitted it had overstated expected profit in its North American business by around £30 million.
This week delivered the next chapter. WHSmith announced plans to issue up to approximately 26 million new ordinary shares around 20% of its existing share capital through a combined institutional placing, director subscription, and retail offer. Alongside that dilutive capital raise came yet another profit warning, the second in three months. Full-year pre-tax profit guidance now sits at £75–90m. In March, it was £90–105m. Before that, £100–110m. Each revision has arrived with a fresh explanation and left investors a little less willing to give management the benefit of the doubt.
We wrote about it at the time: 42% Crash in a Day — Is WHSmith a Steal or a Disaster? and nothing since has changed our conclusion.
The trading update for the 14 weeks to 6 June 2026 offered little comfort. Total revenues rose 5% at constant currency, but like-for-like growth came in at just 2%, weighed down by falling passenger numbers particularly from disruption to Middle East flight schedules. Dig into the recent seven-week trend and things look worse: group like-for-like revenue slowed to just 1%, North America declined 4%, and the Resorts division heavily exposed to Las Vegas fell 11%.
InMotion like-for-like revenue decreased 5% over the last seven weeks, with a sharp decline in store footfall. The InMotion portfolio review, which management had promised would be resolved in the first half of 2026, is still ongoing. The group now anticipates a non-cash impairment charge of up to £150m for the full year relating to goodwill and store write-downs.
The capital raise is intended to reduce leverage to approximately 2x by the end of the financial year, down from levels management acknowledged were “higher than targeted.” That phrase “higher than targeted” is doing a great deal of work. It describes a company that borrowed heavily to fund an international expansion, discovered the expansion was not performing as expected, restated its profits, and is now asking shareholders to help plug the gap. Dan Coatsworth at AJ Bell put it plainly: “It’s not the best conditions to go cap in hand to shareholders.”
The structural idea airports as captive retail is not wrong. WHSmith’s UK hospital and rail businesses are holding up reasonably well. But the North American bet has consumed management attention, damaged credibility, and left the balance sheet stretched at exactly the wrong moment. The share price is now at levels not seen since 2010. Whether the new capital and restructured strategy can turn this around is an open question. What is not open to debate is how we got here.
Halma: Punished for Being Merely Very Good
Halma’s situation requires a different kind of analysis one that starts not with the company, but with what the market had come to expect of it.
Halma (LON: HLMA) is one of those rare British businesses that has compounded quietly for decades without much fuss or drama. It acquires niche industrial and safety technology companies, gives them autonomy, and lets them grow. Fire detection systems, water quality monitors, medical diagnostics unglamorous but essential products that regulators require and customers replace on a cycle. Thursday’s full-year results marked the company’s 23rd consecutive year of adjusted profit growth.
The numbers for the year to 31 March 2026 were, by any reasonable measure, excellent. Revenue grew 15% to £2.58bn. Adjusted EBIT rose 22% to £594.5m. Adjusted EPS up 21%. Cash conversion at 93%. The company crossed the £2.5bn revenue and £500m profit milestones for the first time in its history, and did so while investing a record £600m back into the business £447m of that on acquisitions alone.
So why did the shares fall 15%?
The answer lies inside one division. Buried within Halma’s Environmental & Analysis segment is its photonics business centred on Avo Photonics, a company acquired in 2011 for $9m that has since built a long-term relationship with a large technology hyperscaler expanding its data centre infrastructure. As AI investment has accelerated, so has demand for Avo’s optical technologies. By the end of FY2026, revenue from this single customer had risen to 20% of group sales up from 15% the prior year. That concentration is a risk worth watching in its own right.
But the immediate trigger for Thursday’s sell-off was the guidance. Halma guided for low double-digit organic constant-currency revenue growth in FY2027, against 16% delivered in FY2026. In FY2026, photonics contributed around eight percentage points to that organic growth figure. Next year, management expects the contribution to be around five. That gap, three percentage points of photonics momentum was enough to send the shares to the bottom of the FTSE 100.
UBS kept its Buy rating after the drop, calling it a “pure de-rating” and arguing that expectations for exceptional photonics growth have now been firmly normalised. Citi went further, upgrading the stock to Buy from Neutral on Friday, saying the shares were no longer pricing in any photonics premium at all.
That is the crux of it. Halma has not issued a profit warning. It has not restated its accounts. It has not asked shareholders for money. It delivered record results across every major metric and guided for continued double-digit growth. The market’s reaction says more about what was priced in than about the quality of the business underneath.
To conclude
Both stocks fell around 15% this week. Both will appear in the same end-of-week roundups, the same sell-off summaries, the same “FTSE losers” tables. To a passive observer scrolling through the numbers, they look identical.
They are not. WHSmith is a business navigating a genuine crisis a North American expansion that has not delivered, an accounting error that shattered management credibility, a balance sheet that required emergency repair, and a shareholder base whose patience is running thin. Halma delivered one of the strongest sets of results in its long history and was marked down because its fastest-growing division is now expected to grow a little less quickly than the market had assumed.
The stock market rarely pauses to draw that distinction. Algorithms don’t. Sentiment doesn’t. In the short term, a 15% drop is a 15% drop, whatever the cause. But the cause matters enormously to anyone thinking about what these businesses look like in three or five years.
That is, ultimately, the only question worth asking.
Thanks for reading,
Ollz
References
Further Reading
42% Crash in a Day — Is WHSmith a Steal or a Disaster? — Corfe Capital, September 2025
Halma PLC: From Tea Plantations to Photonics — The Armchair Trader — a solid deep-dive on how the business became what it is today
WHSmith: A Closer Look at Modella Capital and TGJones — Retail Gazette — useful background on the high street sale and what came next